Joe DownsCEO & Co-Founder, Belrose Storage Group. Founder, Storage Moguls.

Planning for the five to seven year balloon

17 Apr 2026 · 1 min

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1:00

In this concise presentation, the speaker explains how community banks structure 5‑ to 7‑year balloon loans for commercial real‑estate acquisitions. At the loan’s maturity—typically the 5‑ or 7‑year mark—the borrower must either refinance the debt or sell the property. Credit committees evaluate whether the borrower will be able to meet this requirement. A property that is stabilized, with rising rents and a documented performance track record, is considered refinancable, whereas a value‑add project that has not been executed is not. The speaker stresses that the balloon date is a checkpoint, not a problem, provided the operator has been planning for it from day one. By executing a value‑add plan, raising rents to market, stabilizing occupancy, and maintaining the asset, operators can often refinance at the balloon point—sometimes as early as the 5‑year mark—into better terms: higher appraised value, lower loan‑to‑value, and a stronger relationship with the lender.

Chapters

Have your exit or your refinance path to community banks. They're 5 to 7 year terms, so 5 to 7 year balloons. So they're going to— at the 5 or 7 year mark, depending on what you negotiate, you're going to be required to refinance or sell at the maturity there. The credit committee is thinking about whether you'll be able to do that. So a stabilized facility with rising rents and a documented track record, that's going to be refinancable. A value-add deal that didn't execute is not. So have an honest answer for this question. The 5 to 7 year balloon is a checkpoint though. It's not a problem. If you've been building towards it from the day you close, you won't have a problem. Operators who execute their value-add plan, raise rents to market, stabilize occupancy, and maintain the asset well are refinancing at that, maybe at the 5-year mark into better terms than their original loan. So higher appraised value, lower LTV, proven track record, existing lender relationship.